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PALO ALTO, CA -- (Marketwired) -- 07/23/13 -- VMware, Inc. (NYSE: VMW), the global leader in virtualization and cloud infrastructure, today announced financial results for the second quarter of 2013:

• Revenues for the second quarter were $1.24 billion, an increase of 11% from the second quarter of 2012. Excluding revenues attributable to GoPivotal and all divestitures that occurred in 2013, revenues for the second quarter increased 15% from the second quarter of 2012.(1 )
• Operating income for the second quarter was $270 million, an increase of 28% from the second quarter of 2012. Non-GAAP operating income for the second quarter was $417 million, an increase of 16% from the second quarter of 2012.
  
  
• Net income for the second quarter was $244 million, or $0.57 per diluted share, up 28% per diluted share compared to $192 million, or $0.44 per diluted share, for the second quarter of 2012. Non-GAAP net income for the quarter was $343 million, or $0.79 per diluted share, up 16% per diluted share compared to $296 million, or $0.68 per diluted share, for the second quarter of 2012.
  
  
• Operating cash flows for the second quarter were $534 million, an increase of 36% from the second quarter of 2012. Free cash flows for the quarter were $458 million, an increase of 32% from the second quarter of 2012.
  
  
• Cash, cash equivalents and short-term investments were $5.32 billion and unearned revenue was $3.60 billion as of June 30, 2013.

Annual 2013 revenues are expected to be in the range of $5.12 billion to $5.26 billion, and annual license revenues are expected to be in the range of $2.21 billion to $2.29 billion. Excluding revenues attributable to GoPivotal and all divestitures that occurred in 2013, this represents growth rates of 15% to 18% for total revenues and 8% to 12% for license revenues.1

Third quarter 2013 revenues are expected to be in the range of $1.27 billion to $1.30 billion, and third quarter license revenues are expected to be between $535 million and $555 million. Excluding revenues attributable to GoPivotal and all divestitures that occurred in 2013, this represents growth rates of 17% to 20% for total revenues and 12% to 16% for license revenues.(1)

"The second quarter was a strong finish to a solid first half of 2013 for VMware," said Pat Gelsinger, chief executive officer, VMware. "We see a significant market opportunity in the second half of 2013 and beyond. VMware continues to succeed because we are uniquely positioned to help customers move from the client-server era to the mobile-cloud era of computing. As we help them bridge to this new world, we're empowering businesses to capture new levels of efficiency, control and agility."

"We are pleased with our second quarter results," said Jonathan Chadwick, chief financial officer, VMware. "We exceeded the high end of our revenue guidance and achieved a record high non-GAAP operating margin in Q2. The company is aligned and focused, and we enter the second half of the year with significant momentum."

Recent Highlights & Strategic Announcements

• On May 21, 2013, VMware unveiled VMware vCloud® Hybrid Service™, an Infrastructure as a Service ("IaaS") cloud operated by VMware and built on the trusted foundation of VMware vSphere®, giving customers a common platform to seamlessly extend their data center to the cloud.
  
  
• On May 22, 2013, VMware and SAP AG announced a new model to deliver SAP Core Solutions and SAP HANA® in the newly announced VMware vCloud® Hybrid Service™. The joint offering is designed to allow customers to consume SAP solutions on VMware vCloud Hybrid Service in a true Opex model with subscription pricing for both software and infrastructure services. The joint offering is expected to deliver a fully managed subscription service offered by VMware on-premise, in the cloud or within hybrid deployments.
  
  
• On June 10, 2013, VMware announced that NTT Communications ("NTT Com"), the cloud service provider of one of the world's largest telecommunications companies NTT Group, will deploy VMware network virtualization as a core technology for its new cloud service, Enterprise Cloud ("EC"). By incorporating VMware network virtualization into its EC service, NTT Com will provide seamless and flexible connectivity between customer data centers and the NTT Com cloud without changing the IP addresses of a customer's existing, on-premise environment.
  
  
• On June 11, 2013, VMware introduced VMware® vCenter™ Log Insight™, a new automated log management and analytics product for the Cloud Era. By extending analytics to logs, VMware enables IT organizations to gain real-time insights from vast amounts of log data generated by applications, physical hardware and virtualized infrastructure, helping to minimize troubleshooting times as well as improve operational efficiency and reduce IT costs.
  
  
• In May and June of 2013, VMware made announcements regarding VMware vSphere® integration with Apache Hadoop. MapR Technologies, Inc. and VMware announced that MapR's Distribution for Apache Hadoop is now certified for VMware vSphere. In addition, Cloudera and VMware announced that Cloudera Enterprise is now certified to run on vSphere. Through the VMware Ready™ program, VMware and Cloudera completed a detailed joint validation process, which enables enterprises to simplify and accelerate the use of Apache Hadoop within virtual and cloud environments.

The company will host a conference call today at 2:00 p.m. PT/ 5:00 p.m. ET to review financial results and business outlook. A live web broadcast of the event will be available on the VMware Investor Relations website at http://ir.vmware.com. Slides will accompany the web broadcast. The replay of the webcast and slides will be available on the website for two months. In addition, six quarters of historical data for revenue and unearned revenue, excluding revenue generated each period by the products and services contributed to GoPivotal on April 1, 2013 and the products and services associated with the divestures that occurred in 2013, will also be made available at http://ir.vmware.com in conjunction with the conference call. Please also note that beginning with the third quarter of 2013, VMware will provide forward-looking guidance that it presents in connection with quarterly earnings announcements only on its quarterly earnings conference calls. VMware does not plan to provide this information in its quarterly earnings press releases.

(1)Comparative growth percentages exclude revenues in each period attributable to the products and services contributed to GoPivotal, Inc. and the products and services associated with divestitures consummated by VMware in 2013. On a GAAP basis, the range of expected annual 2013 revenues represents growth rates of 11% to 14%, the range of expected annual license revenues represents growth rates of 6% to 10%, the range of expected third quarter 2013 revenues represents growth rates of 12% to 15% and the range of expected third quarter 2013 license revenues represents growth rates of 9% to 13%.

About VMware

VMware is the leader in virtualization and cloud infrastructure solutions that enable businesses to thrive in the Cloud Era. Customers rely on VMware to help them transform the way they build, deliver and consume Information Technology resources in a manner that is evolutionary and based on their specific needs. With 2012 revenues of $4.61 billion, VMware has more than 500,000 customers and 55,000 partners. The company is headquartered in Silicon Valley with offices throughout the world and can be found online at www.vmware.com.

Additional Information

Our website is located at www.vmware.com, and our investor relations website is located at http://ir.vmware.com. Our goal is to maintain the investor relations website as a portal through which investors can easily find or navigate to pertinent information about us, all of which is made available free of charge. The additional information includes materials that we file with the SEC; announcements of investor conferences and events at which our executives talk about our products, services and competitive strategies; webcasts of our quarterly earnings calls, investor conferences and events (archives of which are also available for a limited time); additional information on our financial metrics, including reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures; press releases on quarterly earnings, product and service announcements, legal developments and international news; corporate governance information; and other news, blogs and announcements that we may post from time to time that investors may find useful or interesting.

VMware, VMware Ready, VMware vCloud, vCloud Hybrid Service, vSphere, VMware vCenter, and vCenter Log Insight are registered trademarks or trademarks of VMware, Inc. in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective organizations.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to VMware's financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled "About Non-GAAP Financial Measures."

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding VMware's expected third quarter and annual revenue and license revenue projections, VMware's market opportunity in the second half of 2013 and beyond, VMware's continued success and momentum, expectations regarding future services and products, expectations regarding future customers and the benefits of products, and expectations regarding VMware's guidance practices in the future. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in consumer, government and information technology spending; (iii) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization market, and new product and marketing initiatives by our competitors; (iv) factors that affect timing of license revenue recognition such as product announcements and promotions and beta programs; (v) our customers' ability to develop, and to transition to, new products and computing strategies such as cloud computing, desktop virtualization and the software defined data center; (vi) the uncertainty of customer acceptance of emerging technology; (vii) changes in the willingness of customers to enter into longer term licensing and support arrangements; (viii) rapid technological and market changes in virtualization software and platforms for cloud, end user and mobile computing; (ix) changes to product development timelines; (x) VMware's relationship with EMC Corporation and EMC's ability to control matters requiring stockholder approval, including the election of VMware's board members; (xi) our ability to protect our proprietary technology; (xii) our ability to attract and retain highly qualified employees; (xiii) the successful integration of acquired companies and assets into VMware; and (xiv) fluctuating currency exchange rates. These forward-looking statements are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including our most recent reports on Form 10-K and Form 10-Q and current reports on Form 8-K that we may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

                                VMware, Inc.

                     CONSOLIDATED STATEMENTS OF INCOME
                  (in millions, except per share amounts)
                                (unaudited)

                                 For the Three Months   For the Six Months
                                         Ended                 Ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------

Revenues:
   License                       $   530.5  $   517.2  $ 1,018.7  $   999.1
   Services                          712.6      605.8    1,415.9    1,179.1
                                 ---------  ---------  ---------  ---------
Total revenues                     1,243.1    1,123.0    2,434.6    2,178.2
Operating expenses (1):
   Cost of license revenues           54.6       56.6      111.9      113.3
   Cost of services revenues         118.5      122.7      243.1      236.8
   Research and development          260.7      248.6      531.2      471.0
   Sales and marketing               442.1      391.5      859.5      754.9
   General and administrative         96.3       91.7      194.8      173.1
   Realignment charges                 0.6         --       63.5         --
                                 ---------  ---------  ---------  ---------
Operating income                     270.3      211.9      430.6      429.1
Investment income                      7.0        6.9       14.8       12.7
Interest expense with EMC             (0.9)      (1.2)      (1.9)      (2.4)
Other income (expense), net           16.9       (3.5)      13.9       (1.4)
                                 ---------  ---------  ---------  ---------
Income before income taxes           293.3      214.1      457.4      438.0
Income tax provision                  49.2       22.4       39.7       54.8
                                 ---------  ---------  ---------  ---------
Net income                       $   244.1  $   191.7  $   417.7  $   383.2
                                 =========  =========  =========  =========

Net income per weighted-average
 share, basic for Class A and
 Class B                         $    0.57  $    0.45  $    0.98  $    0.90

Net income per weighted-average
 share, diluted for Class A and
 Class B                         $    0.57  $    0.44  $    0.97  $    0.88

Weighted-average shares, basic
 for Class A and Class B             428.3      427.2      428.2      426.1
Weighted-average shares, diluted
 for Class A and Class B             432.0      434.6      432.4      434.0

(1) Includes stock-based
 compensation as follows:
   Cost of license revenues      $     0.5  $     0.5  $     1.0  $     1.0
   Cost of services revenues           6.7        7.1       14.0       12.9
   Research and development           51.0       48.0      113.3       87.4
   Sales and marketing                33.4       33.9       69.5       59.1
   General and administrative         11.6       11.4       25.7       22.3
   Realignment charges                 0.3         --        5.7         --



                                VMware, Inc.

                         CONSOLIDATED BALANCE SHEETS
                   (in millions, except per share amounts)
                                 (unaudited)

                                                   June 30,     December 31,
                                                     2013           2012
                                                 ------------  -------------

                     ASSETS
Current assets:
    Cash and cash equivalents                    $    1,839.7  $     1,609.3
    Short-term investments                            3,483.3        3,021.5
    Accounts receivable, net of allowance for
     doubtful accounts of $2.1 and $4.3                 940.9        1,150.9
    Due from EMC, net                                    33.7           67.9
    Deferred tax asset                                  158.5          179.4
    Other current assets                                127.8           91.0
                                                 ------------  -------------
Total current assets                                  6,583.9        6,120.0
Property and equipment, net                             742.8          664.7
Other assets, net                                       107.3          128.7
Deferred tax asset                                      118.8          103.0
Intangible assets, net                                  627.3          731.9
Goodwill                                              2,966.4        2,848.1
                                                 ------------  -------------
      Total assets                               $   11,146.5  $    10,596.4
                                                 ============  =============

      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                             $       87.3  $        89.6
    Accrued expenses and other                          661.4          674.7
    Unearned revenues                                 2,230.2        2,195.9
                                                 ------------  -------------
Total current liabilities                             2,978.9        2,960.2
Note payable to EMC                                     450.0          450.0
Unearned revenues                                     1,366.2        1,264.6
Other liabilities                                       195.1          181.6
                                                 ------------  -------------
      Total liabilities                               4,990.2        4,856.4
Contingencies
Stockholders' equity:
  Class A common stock, par value $.01;
   authorized 2,500 shares; issued and
   outstanding 129.9 and 128.7 shares                     1.3            1.3
  Class B convertible common stock, par value
   $.01; authorized 1,000 shares; issued and
   outstanding 300 shares                                 3.0            3.0
  Additional paid-in capital                          3,440.7        3,431.7
  Accumulated other comprehensive income (loss)          (4.7)           5.7
  Retained earnings                                   2,716.0        2,298.3
                                                 ------------  -------------
      Total stockholders' equity                      6,156.3        5,740.0
                                                 ------------  -------------
        Total liabilities and stockholders'
         equity                                  $   11,146.5  $    10,596.4
                                                 ============  =============



                                VMware, Inc.

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (in millions)
                                (unaudited)

                                 For the Three Months   For the Six Months
                                         Ended                 Ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------

Operating activities:
Net income                       $   244.1  $   191.7  $   417.7  $   383.2
Adjustments to reconcile net
 income to net cash provided by
 operating activities:
  Depreciation and amortization       87.0       89.4      178.3      175.2
  Stock-based compensation           103.2      100.9      219.2      182.7
  Excess tax benefits from
   stock-based compensation          (25.6)     (32.7)     (47.8)     (86.4)
  Non-cash realignment charges         0.3         --       14.8         --
  Gain on disposition of certain
   lines of business and other,
   net                               (19.3)        --      (19.3)        --
  Other                                1.0        0.4       (1.2)      (0.6)
  Changes in assets and
   liabilities, net of
   acquisitions:
    Accounts receivable             (172.6)     (91.3)     207.6      135.3
    Other assets                     (34.2)     (69.6)     (75.0)    (117.1)
    Due to/from EMC, net             (25.2)     (43.4)      34.3       12.1
    Accounts payable                  26.6        4.9       18.3       17.4
    Accrued expenses                  94.1       95.8      (21.2)       0.9
    Income taxes receivable from
     EMC                              15.5         --       15.5         --
    Income taxes payable              (4.1)      12.4       (2.3)      67.7
    Deferred income taxes, net        37.1       (1.4)       8.9      (36.4)
    Unearned revenues                206.2      134.2      262.9      233.9
                                 ---------  ---------  ---------  ---------
Net cash provided by operating
 activities                          534.1      391.3    1,210.7      967.9
                                 ---------  ---------  ---------  ---------

Investing activities:
Additions to property and
 equipment                           (76.1)     (44.3)    (153.9)     (78.0)
Purchases of available-for-sale
 securities                         (917.4)  (1,253.6)  (1,654.3)  (1,955.1)
Sales of available-for-sale
 securities                          333.6      348.4      819.2      770.8
Maturities of available-for-sale
 securities                          187.7      277.1      369.7      534.1
Proceeds from disposition of
 certain lines of business            30.0         --       30.9         --
Business acquisitions, net of
 cash acquired                          --     (102.2)    (184.5)    (102.2)
Other investing                       (1.0)      (2.6)      (2.1)      (4.2)
                                 ---------  ---------  ---------  ---------
Net cash used in investing
 activities                         (443.2)    (777.2)    (775.0)    (834.6)
                                 ---------  ---------  ---------  ---------

Financing activities:
Proceeds from issuance of common
 stock                                47.2       33.6      115.1      144.6
Repurchase of common stock          (120.0)    (178.2)    (302.0)    (178.2)
Excess tax benefits from stock-
 based compensation                   25.6       32.7       47.8       86.4
Shares repurchased for tax
 withholdings on vesting of
 restricted stock                    (44.1)     (51.4)     (66.2)     (65.0)
                                 ---------  ---------  ---------  ---------
Net cash used in financing
 activities                          (91.3)    (163.3)    (205.3)     (12.2)
                                 ---------  ---------  ---------  ---------
Net increase (decrease) in cash
 and cash equivalents                 (0.4)    (549.2)     230.4      121.1
Cash and cash equivalents at
 beginning of the period           1,840.1    2,626.1    1,609.3    1,955.8
                                 ---------  ---------  ---------  ---------
Cash and cash equivalents at end
 of the period                   $ 1,839.7  $ 2,076.9  $ 1,839.7  $ 2,076.9
                                 =========  =========  =========  =========



                                VMware, Inc.

                       SUPPLEMENTAL REVENUES SCHEDULE
             (INCLUDES RECONCILIATION OF GAAP TO NON-GAAP DATA)
                               (in millions)
                                (unaudited)

                   For the Three
                   Months Ended            For the Three Months Ended
                ------------------  ---------------------------------------
                June 30,    March   December  September  June 30,    March
                  2013    31, 2013  31, 2012   30, 2012    2012    31, 2012
                --------  --------  --------  ---------  --------  --------
Revenues as
 reported (1):
  License       $  530.5  $  488.2  $  596.7  $   491.1  $  517.2  $  481.9
  Software
   maintenance     614.3     605.4     591.0      550.6     519.1     492.3
  Professional
   services         98.3      97.9     105.5       92.0      86.7      81.0
                --------  --------  --------  ---------  --------  --------
Total revenues  $1,243.1  $1,191.5  $1,293.2  $ 1,133.7  $1,123.0  $1,055.2
                ========  ========  ========  =========  ========  ========

Change (%) over
 prior year
  License            2.6%      1.3%     16.1%      10.7%     11.3%     15.0%
  Software
   maintenance      18.3%     23.0%     27.5%      29.0%     34.4%     35.3%
  Professional
   services         13.4%     20.8%     27.0%      28.6%     23.7%     33.0%
                --------  --------  --------  ---------  --------  --------
Total revenues      10.7%     12.9%     22.0%      20.4%     21.9%     25.1%
                ========  ========  ========  =========  ========  ========

Revenues as
 reported,
 excluding
 GoPivotal (2)
  License       $  530.5  $  484.7  $  589.1  $   486.0  $  508.0  $  477.8
  Software
   maintenance     614.3     601.2     586.8      546.5     515.0     488.8
  Professional
   services         98.3      83.7      77.6       71.4      67.7      69.8
                --------  --------  --------  ---------  --------  --------
Total revenues  $1,243.1  $1,169.6  $1,253.5  $ 1,103.9  $1,090.7  $1,036.4
                ========  ========  ========  =========  ========  ========

Change (%) over
 prior year
  License            4.4%      1.5%     15.7%      11.2%      9.8%     15.1%
  Software
   maintenance      19.3%     23.0%     27.5%      28.9%     34.3%     35.0%
  Professional
   services         45.1%     19.8%      6.4%      12.3%      8.3%     24.3%
                --------  --------  --------  ---------  --------  --------
Total revenues      14.0%     12.8%     20.3%      19.4%     20.0%     24.4%
                ========  ========  ========  =========  ========  ========

Revenues as
 reported,
 excluding
 GoPivotal and
 all
 dispositions
 (3)
  License       $  526.3  $  475.9  $  581.0  $   479.2  $  499.8  $  470.6
  Software
   maintenance     610.9     589.8     574.1      534.7     503.6     478.1
  Professional
   services         97.8      83.1      77.4       70.4      67.2      69.3
                --------  --------  --------  ---------  --------  --------
Total revenues  $1,235.0  $1,148.8  $1,232.5  $ 1,084.3  $1,070.6  $1,018.0
                ========  ========  ========  =========  ========  ========

Change (%) over
 prior year
  License            5.3%      1.1%     16.0%      11.8%      9.2%     14.5%
  Software
   maintenance      21.3%     23.4%     27.2%      28.5%     33.1%     33.7%
  Professional
   services         45.6%     19.9%      6.3%      11.3%      8.1%     24.3%
                --------  --------  --------  ---------  --------  --------
Total revenues      15.4%     12.9%     20.3%      19.4%     19.2%     23.5%
                ========  ========  ========  =========  ========  ========

Reconciliation
 of "revenues as
 reported" to
 "revenues as
 reported,
 excluding
 GoPivotal and
 all
 dispositions":

Revenues as
 reported,
 excluding
 GoPivotal and
 all
 dispositions
 (3)            $1,235.0  $1,148.8  $1,232.5  $ 1,084.3  $1,070.6  $1,018.0
  GoPivotal            -      21.9      39.7       29.7      32.3      18.7
  All
   dispositions      8.1      20.8      21.0       19.7      20.1      18.5
                --------  --------  --------  ---------  --------  --------
Revenues as
 reported (1)   $1,243.1  $1,191.5  $1,293.2  $ 1,133.7  $1,123.0  $1,055.2
                ========  ========  ========  =========  ========  ========

(1) Represents revenues reported each quarter.

(2) Represents revenues reported each quarter less the revenues attributable
    to products and services contributed by VMware to GoPivotal, Inc.
    ("GoPivotal") on April 1, 2013. All quarters have been adjusted to
    exclude the related revenues.

(3) Represents revenues reported each quarter less a) the revenues
    attributable to products and services contributed by VMware to GoPivotal
    on April 1, 2013 and b) the revenues attributable to all lines of
    businesses which were disposed of in 2013, including Zimbra which was
    disposed of in July 2013. All quarters have been adjusted to exclude the
    related revenues.



                                VMware, Inc.

                  SUPPLEMENTAL UNEARNED REVENUES SCHEDULE
             (INCLUDES RECONCILIATION OF GAAP TO NON-GAAP DATA)
                               (in millions)
                                (unaudited)

                June 30,   March    December  September  June 30,   March
                  2013    31, 2013  31, 2012   30, 2012    2012    31, 2012
                --------  --------  --------  ---------  --------  --------
Unearned
 revenues as
 reported (1)
  License       $  427.2  $  446.2  $  462.7  $   366.1  $  375.6  $  373.0
  Software
   maintenance   2,903.3   2,796.5   2,755.0    2,415.3   2,357.0   2,245.7
  Professional
   services        265.9     247.5     242.9      211.9     209.8     189.4
                --------  --------  --------  ---------  --------  --------
Total unearned
 revenues       $3,596.4  $3,490.2  $3,460.6  $ 2,993.3  $2,942.4  $2,808.1
                ========  ========  ========  =========  ========  ========

Change (%) over
 prior year
  License           13.7%     19.6%     18.9%      35.8%     56.5%     48.4%
  Software
   maintenance      23.2%     24.5%     29.1%      33.8%     39.8%     41.3%
  Professional
   services         26.8%     30.6%     30.8%      32.5%     37.9%     37.3%
                --------  --------  --------  ---------  --------  --------
Total unearned
 revenues           22.2%     24.3%     27.8%      34.0%     41.6%     41.9%
                ========  ========  ========  =========  ========  ========

Unearned
 revenues as
 reported,
 excluding
 GoPivotal and
 all
 dispositions
 (2)
  License       $  427.2  $  406.9  $  414.1  $   327.4  $  336.1  $  351.7
  Software
   maintenance   2,903.3   2,736.1   2,671.2    2,345.9   2,288.9   2,189.1
  Professional
   services        265.9     245.8     240.6      209.7     206.6     186.6
                --------  --------  --------  ---------  --------  --------
Total unearned
 revenues       $3,596.4  $3,388.8  $3,325.9  $ 2,883.0  $2,831.6  $2,727.4
                ========  ========  ========  =========  ========  ========

Change (%) over
 prior year
  License           27.1%     15.7%     11.6%      25.9%     49.4%     45.4%
  Software
   maintenance      26.8%     25.0%     28.5%      33.3%     38.7%     40.4%
  Professional
   services         28.7%     31.7%     30.8%      31.9%     36.2%     36.0%
                --------  --------  --------  ---------  --------  --------
Total unearned
 revenues           27.0%     24.3%     26.3%      32.3%     39.7%     40.7%
                ========  ========  ========  =========  ========  ========

Reconciliation
 of "unearned
 revenues as
 reported" to
 "unearned
 revenues as
 reported,
 excluding
 GoPivotal and
 all
 dispositions":

Unearned
 revenues as
 reported,
 excluding
 GoPivotal and
 all
 dispositions
 (2)            $3,596.4  $3,388.8  $3,325.9  $ 2,883.0  $2,831.6  $2,727.4
  GoPivotal and
   all
   dispositions        -     101.4     134.7      110.3     110.8      80.7
                --------  --------  --------  ---------  --------  --------
Unearned
 revenues as
 reported (1)   $3,596.4  $3,490.2  $3,460.6  $ 2,993.3  $2,942.4  $2,808.1
                ========  ========  ========  =========  ========  ========

(1) Represents unearned revenues reported each quarter.

(2) Represents unearned revenues reported each quarter less a) the unearned
    revenues attributable to products and services contributed by VMware to
    GoPivotal on April 1, 2013 and b) the unearned revenues attributable to
    all lines of businesses which were disposed of in 2013, including Zimbra
    which was disposed of in July 2013. All quarters have been adjusted to
    exclude the related unearned revenues.



                                VMware, Inc.

                   RECONCILIATION OF GAAP TO NON-GAAP DATA
                  For the Three Months Ended June 30, 2013
                   (in millions, except per share amounts)
                                 (unaudited)

                                       Employer
                                       Payroll
                                        Taxes
                                     on Employee
                        Stock-Based     Stock     Intangible   Realignment
                 GAAP   Compensation Transactions Amortization   Charges
                ------  -----------  -----------  -----------  -----------

Operating
 expenses:
  Cost of
   license
   revenues     $ 54.6         (0.5)           -        (22.2)           -
  Cost of
   services
   revenues     $118.5         (6.7)        (0.2)        (0.8)           -
  Research and
   development  $260.7        (51.0)        (1.5)        (0.8)           -
  Sales and
   marketing    $442.1        (33.4)        (1.4)        (1.6)           -
  General and
   administra-
   tive         $ 96.3        (11.6)        (0.5)           -            -
  Realignment
   charges      $  0.6            -            -            -         (0.6)

Operating
 income         $270.3        103.2          3.6         25.4          0.6
Operating
 margin           21.7%         8.3%         0.3%         2.0%         0.1%

Other income
 (expense), net $ 16.9            -            -            -            -

Income before
 income taxes   $293.3        103.2          3.6         25.4          0.6

Income tax
 provision      $ 49.2
Tax rate          16.8%

Net income      $244.1        103.2          3.6         25.4          0.6

Net income per
 weighted-
 average share,
 basic for
 Class A and
 Class B (3)    $ 0.57  $      0.24  $      0.01  $      0.06  $         -

Net income per
 weighted-
 average share,
 diluted for
 Class A and
 Class B (4)    $ 0.57  $      0.24  $         -  $      0.06  $         -


                                    table continued below


                                           Gain on
                                          Disposition
                Acquisition  Capitalized  of Certain
                 and Other    Software     Lines of      Tax      Non-GAAP,
                  Related   Development   Business &  Adjustment      as
                  Items       Costs (1)   Other, Net      (2)      adjusted
                ----------  -----------  -----------  ----------  ---------

Operating
 expenses:
  Cost of
   license
   revenues              -        (13.2)           -           -  $    18.7
  Cost of
   services
   revenues              -            -            -           -  $   110.8
  Research and
   development           -            -            -           -  $   207.4
  Sales and
   marketing             -            -            -           -  $   405.7
  General and
   administra-
   tive               (0.6)           -            -           -  $    83.6
  Realignment
   charges               -            -            -           -  $       -

Operating
 income                0.6         13.2            -           -  $   416.9
Operating
 margin                  -          1.1%           -           -       33.5%

Other income
 (expense), net          -            -        (18.9)          -  $    (2.0)

Income before
 income taxes          0.6         13.2        (18.9)          -  $   421.0

Income tax
 provision                                                  28.7  $    77.9
Tax rate                                                               18.5%

Net income             0.6         13.2        (18.9)      (28.7) $   343.1

Net income per
 weighted-
 average share,
 basic for
 Class A and
 Class B (3)    $        -  $      0.03  $     (0.04) $    (0.07) $    0.80

Net income per
 weighted-
 average share,
 diluted for
 Class A and
 Class B (4)    $        -  $      0.03  $     (0.04) $    (0.07) $    0.79

(1) For the second quarter of 2013, no costs were capitalized for the
    development of software products. Amortization expense from previously
    capitalized amounts was $13.2.

(2) Non-GAAP financial information for the quarter is adjusted for a tax
    rate equal to our annual estimated tax rate on non-GAAP income. This
    rate is based on our estimated annual GAAP income tax rate forecast,
    adjusted to account for items excluded from GAAP income in calculating
    the non-GAAP financial measures presented above. Our estimated tax rate
    on non-GAAP income is determined annually and may be adjusted during the
    year to take into account events or trends that we believe materially
    impact the estimated annual rate including, but not limited to,
    significant changes resulting from tax legislation, material changes in
    the geographic mix of revenues and expenses and other significant
    events. Due to the differences in the tax treatment of items excluded
    from non-GAAP earnings, as well as the methodology applied to our
    estimated annual tax rates as described above, our estimated tax rate on
    non-GAAP income may differ from our GAAP tax rate and from our actual
    tax liabilities.

(3) Calculated based upon 428.3 basic weighted-average shares for Class A
    and Class B.

(4) Calculated based upon 432.0 diluted weighted-average shares for Class A
    and Class B.



                                VMware, Inc.

                   RECONCILIATION OF GAAP TO NON-GAAP DATA
                  For the Three Months Ended June 30, 2012
                   (in millions, except per share amounts)
                                 (unaudited)


                                                  Employer
                                                   Payroll
                                                    Taxes
                                                 on Employee
                                   Stock-Based      Stock      Intangible
                           GAAP   Compensation  Transactions  Amortization
                          ------  ------------  ------------  ------------

Operating expenses:
Cost of license revenues  $ 56.6          (0.5)         (0.1)        (13.7)
Cost of services revenues $122.7          (7.1)         (0.4)         (1.1)
Research and development  $248.6         (48.0)         (2.1)         (0.8)
Sales and marketing       $391.5         (33.9)         (1.4)         (2.9)
General and
 administrative           $ 91.7         (11.4)         (0.4)            -

Operating income          $211.9         100.9           4.4          18.5
Operating margin            18.9%          9.0%          0.5%          1.6%

Income before income
 taxes                    $214.1         100.9           4.4          18.5

Income tax provision      $ 22.4
Tax rate                    10.5%

Net income                $191.7         100.9           4.4          18.5

Net income per weighted-
 average share, basic for
 Class A and Class B (3)  $ 0.45  $       0.24  $       0.01  $       0.04

Net income per weighted-
 average share, diluted
 for Class A and Class B
 (4)                      $ 0.44  $       0.23  $       0.01  $       0.04


                                     table continued below


                         Acquisition  Capitalized
                           Related      Software      Tax      Non-GAAP,
                          Items and   Development  Adjustment      as
                            Other      Costs (1)       (2)      adjusted
                         -----------  -----------  ----------  ---------

Operating expenses:
Cost of license revenues           -        (20.8)          -  $    21.5
Cost of services revenues          -            -           -  $   114.1
Research and development           -            -           -  $   197.7
Sales and marketing                -            -           -  $   353.3
General and
 administrative                 (1.7)           -           -  $    78.2

Operating income                 1.7         20.8           -  $   358.2
Operating margin                 0.1%         1.8%          -       31.9%

Income before income
 taxes                           1.7         20.8           -  $   360.4

Income tax provision                                     42.5  $    64.9
Tax rate                                                            18.0%

Net income                       1.7         20.8       (42.5) $   295.5

Net income per weighted-
 average share, basic for
 Class A and Class B (3) $         -  $      0.05  $    (0.10) $    0.69

Net income per weighted-
 average share, diluted
 for Class A and Class B
 (4)                     $         -  $      0.05  $    (0.09) $    0.68


(1) For the second quarter of 2012, no costs were capitalized for the
    development of software products. Amortization expense from previously
    capitalized amounts was $20.8.

(2) Non-GAAP financial information for the quarter is adjusted for a tax
    rate equal to our annual estimated tax rate on non-GAAP income. This
    rate is based on our estimated annual GAAP income tax rate forecast,
    adjusted to account for items excluded from GAAP income in calculating
    the non-GAAP financial measures presented above. Our estimated tax rate
    on non-GAAP income is determined annually and may be adjusted during the
    year to take into account events or trends that we believe materially
    impact the estimated annual rate including, but not limited to,
    significant changes resulting from tax legislation, material changes in
    the geographic mix of revenues and expenses and other significant
    events. Due to the differences in the tax treatment of items excluded
    from non-GAAP earnings, as well as the methodology applied to our
    estimated annual tax rates as described above, our estimated tax rate on
    non-GAAP income may differ from our GAAP tax rate and from our actual
    tax liabilities.

(3) Calculated based upon 427.2 basic weighted-average shares for Class A
    and Class B.

(4) Calculated based upon 434.6 diluted weighted-average shares for Class A
    and Class B.



                                VMware, Inc.

                   RECONCILIATION OF GAAP TO NON-GAAP DATA
                   For the Six Months Ended June 30, 2013
                   (in millions, except per share amounts)
                                 (unaudited)

                                       Employer
                                       Payroll
                                        Taxes
                                     on Employee
                        Stock-Based     Stock     Intangible   Realignment
                 GAAP   Compensation Transactions Amortization   Charges
                ------  -----------  -----------  -----------  -----------

Operating
 expenses:
  Cost of
   license
   revenues     $111.9         (1.0)           -        (45.5)           -
  Cost of
   services
   revenues     $243.1        (14.0)        (0.4)        (1.8)           -
  Research and
   development  $531.2       (113.3)        (2.5)        (1.8)           -
  Sales and
   marketing    $859.5        (69.5)        (2.1)        (4.2)           -
  General and
   adminis-
   trative      $194.8        (25.7)        (0.5)           -            -
  Realignment
   charges      $ 63.5            -            -            -        (63.5)

Operating
 income         $430.6        223.5          5.5         53.3         63.5
Operating margin  17.7%         9.2%         0.2%         2.2%         2.6%

Other income
 (expense), net $ 13.9            -            -            -            -

Income before
 income taxes   $457.4        223.5          5.5         53.3         63.5

Income tax
 provision      $ 39.7
Tax rate           8.7%

Net income      $417.7        223.5          5.5         53.3         63.5

Net income per
 weighted-
 average share,
 basic for Class
 A and Class B
 (3)            $ 0.98  $      0.52  $      0.02  $      0.12  $      0.15

Net income per
 weighted-
 average share,
 diluted for
 Class A and
 Class B (4)    $ 0.97  $      0.52  $      0.01  $      0.12  $      0.15


                                   table continued below


                                           Gain on
                                          Disposition
                Acquisition Capitalized   of Certain
                 and Other    Software     Lines of      Tax      Non-GAAP,
                  Related   Development   Business &  Adjustment      as
                   Items     Costs (1)    Other, Net      (2)      adjusted
                ----------  -----------  -----------  ----------  ---------

Operating
 expenses:
  Cost of
   license
   revenues              -        (26.3)           -           -  $    39.1
  Cost of
   services
   revenues              -            -            -           -  $   226.9
  Research and
   development           -            -            -           -  $   413.6
  Sales and
   marketing             -            -            -           -  $   783.7
  General and
   administrative     (1.8)           -            -           -  $   166.8
  Realignment
   charges               -            -            -           -  $       -

Operating income       1.8         26.3            -           -  $   804.5
Operating margin         -          1.1%           -           -       33.0%

Other income
 (expense), net          -            -        (18.9)          -  $    (5.0)

Income before
 income taxes          1.8         26.3        (18.9)          -  $   812.4

Income tax
 provision                                                 110.6  $   150.3
Tax rate                                                               18.5%

Net income             1.8         26.3        (18.9)     (110.6) $   662.1

Net income per
 weighted-
 average share,
 basic for Class
 A and Class B
 (3)            $        -  $      0.06  $     (0.04) $    (0.26) $    1.55

Net income per
 weighted-
 average share,
 diluted for
 Class A and
 Class B (4)    $        -  $      0.06  $     (0.04) $    (0.26) $    1.53


(1) For the first six months of 2013, no costs were capitalized for the
    development of software products. Amortization expense from previously
    capitalized amounts was $26.3.

(2) Non-GAAP financial information for the quarter is adjusted for a tax
    rate equal to our annual estimated tax rate on non-GAAP income. This
    rate is based on our estimated annual GAAP income tax rate forecast,
    adjusted to account for items excluded from GAAP income in calculating
    the non-GAAP financial measures presented above. Our estimated tax rate
    on non-GAAP income is determined annually and may be adjusted during the
    year to take into account events or trends that we believe materially
    impact the estimated annual rate including, but not limited to,
    significant changes resulting from tax legislation, material changes in
    the geographic mix of revenues and expenses and other significant
    events. Due to the differences in the tax treatment of items excluded
    from non-GAAP earnings, as well as the methodology applied to our
    estimated annual tax rates as described above, our estimated tax rate on
    non-GAAP income may differ from our GAAP tax rate and from our actual
    tax liabilities.

(3) Calculated based upon 428.2 basic weighted-average shares for Class A
    and Class B.

(4) Calculated based upon 432.4 diluted weighted-average shares for Class A
    and Class B.



                                VMware, Inc.

                   RECONCILIATION OF GAAP TO NON-GAAP DATA
                   For the Six Months Ended June 30, 2012
                   (in millions, except per share amounts)
                                 (unaudited)

                                                  Employer
                                                   Payroll
                                                    Taxes
                                                 on Employee
                                   Stock-Based      Stock      Intangible
                           GAAP   Compensation  Transactions  Amortization
                          ------  ------------  ------------  ------------

Operating expenses:
Cost of license revenues  $113.3          (1.0)            -         (27.0)
Cost of services revenues $236.8         (12.9)         (0.8)         (2.2)
Research and development  $471.0         (87.4)         (4.1)         (1.5)
Sales and marketing       $754.9         (59.1)         (3.4)         (5.9)
General and
 administrative           $173.1         (22.3)         (0.9)            -

Operating income          $429.1         182.7           9.2          36.6
Operating margin            19.7%          8.4%          0.3%          1.7%

Income before income
 taxes                    $438.0         182.7           9.2          36.6

Income tax provision      $ 54.8
Tax rate                    12.5%

Net income                $383.2         182.7           9.2          36.6

Net income per weighted-
 average share, basic for
 Class A and Class B (3)  $ 0.90  $       0.43  $       0.02  $       0.09

Net income per weighted-
 average share, diluted
 for Class A and Class B
 (4)                      $ 0.88  $       0.42  $       0.02  $       0.08


                                    table continued below


                         Acquisition  Capitalized
                           Related      Software      Tax      Non-GAAP,
                          Items and   Development  Adjustment      as
                            Other      Costs (1)       (2)      adjusted
                         -----------  -----------  ----------  ---------

Operating expenses:
Cost of license revenues           -        (42.6)          -  $    42.7
Cost of services revenues          -            -           -  $   220.9
Research and development           -            -           -  $   378.0
Sales and marketing                -            -           -  $   686.5
General and
 administrative                 (1.7)           -           -  $   148.2

Operating income                 1.7         42.6           -  $   701.9
Operating margin                 0.1%         2.0%          -       32.2%

Income before income
 taxes                           1.7         42.6           -  $   710.8

Income tax provision                                     73.1  $   127.9
Tax rate                                                            18.0%

Net income                       1.7         42.6       (73.1) $   582.9

Net income per weighted-
 average share, basic for
 Class A and Class B (3) $         -  $      0.10  $    (0.17) $    1.37

Net income per weighted-
 average share, diluted
 for Class A and Class B
 (4)                     $         -  $      0.11  $    (0.17) $    1.34

(1) For the first six months of 2012, no costs were capitalized for the
    development of software products. Amortization expense from previously
    capitalized amounts was $42.6.

(2) Non-GAAP financial information for the quarter is adjusted for a tax
    rate equal to our annual estimated tax rate on non-GAAP income. This
    rate is based on our estimated annual GAAP income tax rate forecast,
    adjusted to account for items excluded from GAAP income in calculating
    the non-GAAP financial measures presented above. Our estimated tax rate
    on non-GAAP income is determined annually and may be adjusted during the
    year to take into account events or trends that we believe materially
    impact the estimated annual rate including, but not limited to,
    significant changes resulting from tax legislation, material changes in
    the geographic mix of revenues and expenses and other significant
    events. Due to the differences in the tax treatment of items excluded
    from non-GAAP earnings, as well as the methodology applied to our
    estimated annual tax rates as described above, our estimated tax rate on
    non-GAAP income may differ from our GAAP tax rate and from our actual
    tax liabilities.

(3) Calculated based upon 426.1 basic weighted-average shares for Class A
    and Class B.

(4) Calculated based upon 434.0 diluted weighted-average shares for Class A
    and Class B.



                                VMware, Inc.

                              REVENUES BY TYPE
                               (in millions)
                                (unaudited)

                                 For the Three Months   For the Six Months
                                         Ended                 Ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------

Revenues:
  License                        $   530.5  $   517.2  $ 1,018.7  $   999.1
  Services:
    Software maintenance             614.3      519.1    1,219.8    1,011.4
    Professional services             98.3       86.7      196.1      167.7
                                 ---------  ---------  ---------  ---------
  Total services                     712.6      605.8    1,415.9    1,179.1
                                 ---------  ---------  ---------  ---------
Total revenues                   $ 1,243.1  $ 1,123.0  $ 2,434.6  $ 2,178.2
                                 =========  =========  =========  =========


Percentage of revenues:
  License                             42.7%      46.1%      41.8%      45.9%
  Services:
    Software maintenance              49.4%      46.2%      50.1%      46.4%
    Professional services              7.9%       7.7%       8.1%       7.7%
                                 ---------  ---------  ---------  ---------
  Total services                      57.3%      53.9%      58.2%      54.1%
                                 ---------  ---------  ---------  ---------
Total revenues                       100.0%     100.0%     100.0%     100.0%
                                 =========  =========  =========  =========

                                VMware, Inc.

                           REVENUES BY GEOGRAPHY
                               (in millions)
                                (unaudited)


                                 For the Three Months   For the Six Months
                                         Ended                 Ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------

Revenues:
  United States                  $   590.3  $   550.7  $ 1,158.8  $ 1,035.6
  International                      652.8      572.3    1,275.8    1,142.6
                                 ---------  ---------  ---------  ---------
Total revenues                   $ 1,243.1  $ 1,123.0  $ 2,434.6  $ 2,178.2
                                 =========  =========  =========  =========


Percentage of revenues:
  United States                       47.5%      49.0%      47.6%      47.5%
  International                       52.5%      51.0%      52.4%      52.5%
                                 ---------  ---------  ---------  ---------
Total revenues                       100.0%     100.0%     100.0%     100.0%
                                 =========  =========  =========  =========



                                VMware, Inc.

        RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES
                             TO FREE CASH FLOWS
                       (A NON-GAAP FINANCIAL MEASURE)
                               (in millions)
                                (unaudited)

                                                 For the Three Months Ended
                                                          June 30,
                                                 --------------------------
                                                     2013          2012
                                                 ------------  ------------

GAAP cash flows from operating activities        $      534.1  $      391.3
Capital expenditures                                    (76.1)        (44.3)
                                                 ------------  ------------
Free cash flows                                  $      458.0  $      347.0
                                                 ============  ============

About Non-GAAP Financial Measures
To provide investors and others with additional information regarding VMware's results, we have disclosed in this press release the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP income per diluted share and free cash flows. VMware has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. These non-GAAP financial measures, other than free cash flows, differ from GAAP in that they exclude stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquired intangible assets, realignment charges, acquisition and other-related items, the net effect of the amortization and capitalization of software development costs, and gain on disposition of certain lines of business and other net, each as discussed below. Free cash flows differ from GAAP cash flows from operating activities in its treatment of capital expenditures.

We have also presented in this press release additional six quarters of historical data for revenue and unearned revenue, excluding revenue generated each period by the products and services contributed to GoPivotal, Inc. on April 1, 2013 and the products and services associated with the divestures consummated by us in 2013, We believe these measures are useful to investors because they allow investors to make meaningful comparisons of our revenues and unearned revenues across periods.

VMware's management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, to calculate bonus payments and to evaluate VMware's financial performance, the performance of its individual functional groups and the ability of operations to generate cash. Management believes these non-GAAP financial measures reflect VMware's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in VMware's business, as they exclude expenses and gains that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating VMware's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flows provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to repurchase shares, to fund ongoing operations and to fund other capital expenditures.

Management believes these non-GAAP financial measures are useful to investors and others in assessing VMware's operating performance due to the following factors:

• Stock-based compensation. Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. Although stock-based compensation is an important aspect of the compensation of our employees and executives, the expense for the fair value of the stock-based instruments we utilize may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock options is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. Additionally, in order to establish the fair value of performance-based stock awards, which are also an element of our ongoing stock-based compensation, we are required to apply judgment to estimate the probability of the extent to which performance objectives will be achieved. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies.
  
  
• Employer payroll tax on employee stock transactions. The amount of employer payroll taxes on stock-based compensation is dependent on VMware's stock price and other factors that are beyond our control and do not correlate to the operation of the business.
  
  
• Amortization of acquired intangible assets. A portion of the purchase price of VMware's acquisitions is generally allocated to intangible assets, such as intellectual property, and is subject to amortization. However, VMware does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition's purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore, VMware believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.
  
  
• Realignment charges: Realignment charges include workforce reductions, asset impairments and losses on asset disposals. We believe it is useful to exclude these items, when significant, as they are not reflective of our ongoing business and operating results.
  
  
• Acquisition and other-related items. Acquisition and other related items include direct costs of acquisitions and dispositions, such as transaction and advisory fees, which vary significantly and are unique to each transaction. Additionally, VMware does not acquire or dispose of businesses on a predictable cycle.
  
  
• Capitalized software development costs. Capitalized software development costs encompass capitalization of development costs and the subsequent amortization of the capitalized costs over the useful life of the product. Amortization and capitalization of software development costs can vary significantly depending upon the timing of products reaching technological feasibility and being made generally available. We did not capitalize software development costs related to product offerings in either the first half of 2013 or fiscal year 2012 given our current go-to-market strategy. In future periods, we expect our amortization expense to steadily decline as previously capitalized software development costs become fully amortized.
  
  
• Gain on disposition of certain lines of business and other, net. In the first half of 2013, we recognized a gain as a result of exiting certain lines of business under our business realignment plan, which was partially offset by a charge recognized for a non-recoverable strategic investment. These transactions resulted in a net gain of $18.9 million. To the extent that significant gains or losses are realized on such dispositions and strategic investments, they do not occur on a predictable cycle, and such gains and losses are not reflective of our ongoing business and operating results.
  
  
• Tax adjustment. Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating our non-GAAP income. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.

Additionally, we believe that the non-GAAP financial measure free cash flows is meaningful to investors because we review cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations.

The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense that affect VMware's operations. Specifically, in the case of stock-based compensation, if VMware did not pay out a portion of its compensation in the form of stock-based compensation and related employer payroll taxes, the cash salary expense included in operating expenses would be higher, which would affect VMware's cash position. VMware compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP and should not be considered measures of VMware's liquidity. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Management encourages investors and others to review VMware's financial information in its entirety and not rely on a single financial measure.